Commodity Strategies: High-Profit Techniques for Investors and Traders

CHAPTER 7

Exchange-Traded Funds (ETFs) and Commodity Markets

TIMING IS EVERYTHING

The exchange-traded fund (ETF) market has been the most important innovation in the equity markets in the last 30 years. The ETF market started slowly but over the last couple of years has virtually exploded. In 2006 alone there were more than 150 ETFs added, and 2007 looks like it is going to rival that. It appears that the time has finally come for the commodity-based ETF too as we experienced a flood in this area. Prior to 2006, the only commodity-based ETF was gold related. There are now ETFs based on precious metals, the energy markets, the agriculture markets, currencies, and more. But before we get to the specifics on evaluating commodity based ETFs, let's talk about this important market and structure of product. For those of you who have read my book, Point & Figure Charting, 3rd edition, this story about the beginning of the ETF market and my involvement might be familiar, but this product is such an important evolution on Wall Street that it deserves considerable treatment in this book as well.

It is said that timing is everything. In my life I certainly have found this to be true. I remember my early Navy days and how just four short months changed my life. I joined the Navy with the express purpose of entering underwater demolition (UDT) and then moving on to SEAL Team I. Out of boot camp I was told I had to first go to my duty station, Naval Air Squadron VP31, and then apply for underwater ...